Any substantive changes in this Legislative Summary that have been made since the preceding issue are indicated in bold print.
Bill C‑25, An Act to amend the Canada Business Corporations Act, the Canada Cooperatives Act, the Canada Not‑for‑profit Corporations Act, and the Competition Act,1 was introduced in the House of Commons on 28 September 2016 on behalf of the Minister of Innovation, Science and Economic Development.
The bill amends Canada’s primary legislation governing federally regulated commercial entities, including corporations, cooperatives and not‑for‑profit organizations. It aims to reduce regulatory burdens to enhance shareholder democracy and participation, diversity and women’s representation on corporate boards and in management positions, and to improve corporate transparency and business certainty.
Industry Canada (now Innovation, Science and Economic Development Canada) undertook a consultation process in 20142 on the Canada Business Corporations Act3 with a view to ensuring that the governance framework for federally incorporated businesses remained effective. Bill C‑25 addresses many topics discussed during the consultation process, which concluded on 15 May 2014, including diversity on the corporate boards and management teams of Canadian corporations, and shareholder voting and participation rights.
Amendments to the bill were introduced by the Standing Senate Committee on Banking, Trade and Commerce and were subsequently passed by Parliament; in particular, these amendments addressed the length of time incumbent directors of corporations and cooperatives who are not re-elected can remain in their posts, and how corporate diversity disclosures are circulated to shareholders.4
Bill C‑25 received Royal Assent on 1 May 2018.
Bill C‑25 primarily amends the election procedures and communication requirements of the following three Acts, all of which regulate different types of corporate structures in Canada:
Bill C‑25 also amends some of the ways in which Canadian businesses are affiliated under the Competition Act,7 which regulates the conduct of business in Canada. The Act contains both criminal and civil provisions aimed at preventing anticompetitive practices in the Canadian marketplace.
Bill C‑25 amends the Canada Business Corporations Act, the Canada Cooperatives Actand the Canada Not‑for‑profit Corporations Act to replace the terms “unsound mind” and “incompetent” with the term “incapable.”
These amendments clarify the status of individuals who may incorporate a business, sign corporate documents or act as a director; in particular, an individual deemed “incapable” may not perform such duties.
The amendments are found in the following provisions:
Bill C‑25 amends the Canada Business Corporations Act and the Canada Cooperatives Act to clarify that bearer shares, bearer certificates and bearer share warrants are prohibited.8 Shareholders or cooperative members have the opportunity to convert existing bearer instruments into a registered form of security, such as a common share.
The amendments are found in the following provisions:
Bill C‑25 amends the Canada Business Corporations Act, the Canada Cooperatives Actand the Canada Not‑for‑profit Corporations Act to clarify the provisions relating to reserving a desired name that a corporation intends to adopt; prohibiting certain corporate names under prescribed regulations;9 and the manner in which prohibited corporate names are changed or revoked.
These amendments provide that the regulations made pursuant to the three Acts mentioned above may prescribe the period that the corporate name may be reserved, specific prohibitions regarding corporate names, and administrative deadlines regarding the changing or revoking of a corporation’s name.
The amendments are found in the following provisions:
Bill C‑25 also amends the Canada Business Corporations Act, the Canada Cooperatives Act and the Canada Not‑for‑profit Corporations Act to allow certain aspects of corporate practices to be addressed within the regulations, including the following:
The amendments are found in the following provisions:
Canada’s securities regulators permit publicly traded corporations to post certain shareholder communications to the System for Electronic Document Analysis and Retrieval as an alternative to mailing those communications to shareholders. Under “notice and access” rules established or adopted by the Canadian securities’ regulators, publicly traded corporations can use the Internet to provide meeting materials to security holders, such as shareholders. These rules also allow corporations to deliver materials to security holders in a simpler, abbreviated form rather than in the traditional paper “proxy package” form. However, admini0strative restrictions have limited the ability of businesses incorporated under the Canada Business Corporations Act to use these “notice and access” rules.
Bill C‑25 amends the Canada Business Corporations Act and the Canada Cooperatives Act to remove restrictions requiring the use of paper materials, and to allow publicly traded corporations to use the Internet to provide meeting materials to security holders. The bill also amends these Acts to clarify the manner in which a director must retain documents, the documents that may be exempted from disclosure to shareholders and the format of documents issued by a director. In particular, the bill specifies that a director is able to:
The amendments are found in the following provisions:
The election of directors of publicly traded corporations in Canada formerly operated under a “plurality system,” whereby shareholders were permitted either to vote “for” or to “withhold” their vote. Under this system, a director required only a single “for” vote in order to be elected, regardless of the number of “withhold” votes cast.
In 2014, the Toronto Stock Exchange (TSX) announced amendments to the TSX Company Manual10 that required all TSX-listed corporations – except those that are majority-controlled – to adopt a “majority voting” policy. Under such a policy, directors who receive a majority of “withhold” votes for an uncontested position must submit their resignation to the board of directors; the board may then accept or reject the resignation, at its discretion. While this rule is a standard that the TSX has adopted, the TSX is able to change this rule at any time.
For many years, publicly traded corporations in Canada practised “slate voting,” whereby director elections were limited either to voting “for” or to “withholding” a vote for a slate of nominees. In 2012, “individual voting, whereby shareholders may vote for each nominee separately,” became mandatory for TSX-listed corporations.
Prior to 2012, the Canada Business Corporations Act allowed directors to be elected for a three-year term. However, since that time, the TSX has required TSX-listed corporations to adhere to a one-year term of office.
Bill C‑25 amends the Canada Business Corporations Act and the Canada Cooperatives Act to reform the voting and appointment process for directors. The bill requires publicly traded, federally incorporated businesses to do the following:
The amendments are found in the following provisions:
Bill C‑25 amends the Canada Business Corporations Act and the Canada Cooperatives Act to clarify the time at which, and the manner in which, a director may charge and collect fees for the receipt, copying, examination and/or issuance of any document, as well as for any other action that the director is authorized to take. The bill requires that the director be paid before undertaking any of these actions. As well, it clarifies that the Governor in Council may make regulations regarding the amount of such fees and the manner in which they are determined.
The amendments are found in the following provisions:
Bill C‑25 amends the Canada Business Corporations Act and the Canada Cooperatives Act to clarify that a “contract for gratuitous title” made in Quebec is not considered to be a “contract” for the purposes of the definition of “interested persons” who hold a contract with a dissolved corporation.
In Quebec, a “contract for gratuitous title” is a written document declaring that a gift is being made from one party to another party; under the province’s civil law, it is considered a “contract.” Elsewhere in Canada, a document declaring that a gift is being made does not constitute a contract; under common law, a contract requires the exchange of some item or benefit for another item or benefit, such as the exchange of money for services.
The amendments are found in the following provisions:
Bill C‑25 amends the Canada Business Corporations Act and the Canada Cooperatives Act to remove the requirement for a director or officer to sign the corporation’s articles, or a statement relating to the corporation, prior to sending the articles or statement to the Director of Corporations Canada (the Director). The bill also removes the requirement for the Director to file certain documents after their receipt, such as a certificate issued in response to a statement sent by a director of the corporation.
The amendments are found in the following provisions:
Formerly, the Director could waive statutory requirements to produce or deliver financial statements to shareholders or the general public on reasonable grounds and on any reasonable condition that the Director considered appropriate. Bill C‑25 amends the Canada Business Corporations Act and the Canada Cooperatives Act to clarify the documents that the Director may exempt from the statutory requirements to disclose to a corporation’s shareholders or the general public.
In particular, on application by a federally incorporated business, the Director may now waive the statutory requirements to produce or deliver financial statements to shareholders – or, in the case of a distributing corporation, the general public – if the detriment to the corporation arising from such a disclosure would exceed the benefit to shareholders or the general public.
The amendments are found in the following provisions:
In circumstances to be prescribed by regulation and on the application of any interested person, the Director may exempt the management of a federally incorporated cooperative from doing the following:
The amendments are found in the following provisions:
Bill C‑25 removes the Governor in Council’s authority to make regulations concerning the standards that accounting bodies must follow when preparing the financial statements of corporations.
The bill gives the Governor in Council the authority to make regulations concerning the powers that a shareholder may grant in the form of a proxy.
The amendments are found in the following provisions:
In 2014, some provincial securities regulators began requiring TSX-listed corporations to provide annual reports on their approach to fostering gender diversity on their boards of directors and among their executive officers.
Bill C‑25 amends the Canada Business Corporations Act to require a distributing federally incorporated business to make disclosures about the diversity of its board of directors and among its management. Directors are required to provide the shareholders with information explaining the reasons for the lack of a disclosure. These disclosures are to be sent to shareholders and to the Director at the same time that the notice of a shareholder meeting is sent. The required content of these disclosures will be set out in forthcoming regulations.14
The amendment is found in the following provision:
Bill C‑25 amends the Canada Business Corporations Act to remove the option for individuals authorized by the director with relevant knowledge of a corporation – or the incorporators of the business – to sign the corporation’s various outgoing notifications and annual financial returns.
The amendment is found in the following provision:
Bill C‑25 amends the Canada Business Corporations Act to introduce a requirement for the Director to publish, in a publication that is generally available to the public, a notice of any Director’s decision granting an application that has been made by the corporation for it do the following:
The amendment is found in the following provision:
Declarations are written affirmations of facts. They are signed by an individual who is declaring that, to the best of the individual’s knowledge, the facts are true.
Bill C‑25 amends the Canada Cooperatives Act so that the use of “declarations” in relation to the administrative activities of cooperatives in Canada is no longer required. In particular, the requirement for the use of declarations in the following circumstances is discontinued:
The amendments are found in the following provisions:
Bill C‑25 amends the Canada Cooperatives Act to remove the requirement to include the name and residence of each of the incorporators of a cooperative within the articles of incorporation. It also removes the requirement for the incorporators to sign these articles.
The amendment is found in the following provision:
Bill C‑25 amends the Canada Cooperatives Act to clarify that, upon changing the name of a cooperative, a director must undertake two actions: issue a certificate of amendment detailing the new name; and publish, in a publication that is generally available to the public, a notice indicating the new name.
The amendment is found in the following provision:
Bill C‑25 amends the Canada Cooperatives Act to simplify the administrative requirements for amalgamating cooperatives, and to remove the specific administrative measures applicable to the declarations of “non-profit housing cooperatives” and “worker cooperatives.”
The amendment is found in the following provision:
Bill C‑25 amends the Canada Cooperatives Act to clarify that a director must publish, in a publication that is generally available to the public, a notice of any decision that the director has made granting an application in the following circumstances:
The amendment is found in the following provision:
Bill C‑25 amends the Canada Not‑for‑profit Corporations Act to clarify that the Director must publish, in a publication that is generally available to the public, a notice of any decision that the Director has made granting an application in the following circumstances:
The amendments are found in the following provision:
Bill C‑25 broadens the affiliation rules under the Competition Act to include a greater range of business structures. The structures include partnerships, sole proprietorships, trusts and unincorporated businesses (hereafter, collectively referred to as “entities”). The treatment of these entities is aligned with the treatment of corporations under the Act. Bill C‑25 does the following:
The amendments are found in the following provisions:
Bill C‑25 also makes a number of consequential amendments to the Canada Business Corporations Act, the Canada Cooperatives Act and the Canada Not‑for‑profit Corporations to improve the alignment of the English and French versions of these Acts, to modernize or otherwise improve existing language, or to update or add a new reference to a provision number changed by Bill C‑25.
Clauses 5, 6, 14, 26, 29, 30, 33, 34, 35, 43 and 46 amend sections 13, 19(2), 126(1), 193, 212(2)(b), 213(4)(b), 235(3), 237.7(4), 252.5(3), 265(8) and 267.1, respectively, of the French version of the Canada Business Corporations Act.
Clauses 55, 64, 79, 80, 81, 82, 84, 85, 89(2) and 93 amend sections 30(2), 171(1), 311(2)(b), 312(4)(b), 315(4)(a), 320(b), 335(4), 337.7(4), 372(1)(d) and 376.1(8), respectively, of the French version of the Canada Cooperatives Act.
Clauses 16, 17, 23, 27, 28(1), 28(2) to 28(4), 28(5), 28(6), 31, 36(1), 36(2) to 36(5), 38(1) and 38(3) amend sections 138(3), 150(1) and 150(2), 161(2)(b), 208, 209(1), 209(3), 209(3)(a), 209(3)(b), 209(3.1), 209(4), 221(e), 258.1, 258.1(b) to 258.1(e), 261(1)(a) and 261(1)(c) of the Canada Business Corporations Act.
Clauses 56, 57, 67, 77, 78(2) and 94 amend sections 58(4)(a), 61(5), 199(2), 307, 308(3)(a) and 377, respectively, of the Canada Cooperatives Act.
Clauses 101, 102, 104, 105, 106(1) and 107 amend sections 128(7), 238, 279(1) to 279(2), 282, 283(1) and 293(1)(a), respectively, of the Canada Not‑for‑profit Corporations Act.
Most sections of Bill C‑25 come into force on Royal Assent. However, clause 108 provides for the following provisions to come into force on other days, to be fixed by order of the Governor in Council:
* Notice: For clarity of exposition, the legislative proposals set out in the bill described in this Legislative Summary are stated as if they had already been adopted or were in force. It is important to note, however, that bills may be amended during their consideration by the House of Commons and Senate, and have no force or effect unless and until they are passed by both houses of Parliament, receive Royal Assent, and come into force. [ Return to text ]
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